DXY softened a touch last night:
But that couldn’t save the Australian dollar which collapsed with coronavirus:
Gold is still strong:
Oil is weak when Libya troubles don’t matter:
Metals fell:
Big miners whiplashed lower:
With EM stocks:
Junk softened:
As Treasuries were bid:
Bunds less so:
Aussie bonds boomed:
Falling yields helped prevent a stock rout:
Westpac has the wrap:
Event Wrap Increasing reported cases of the coronavirus in China and its neighbours constantly checked the mild rebounds in sentiment.
ZEW’s German and Eurozone business surveys soundly beat market expectations. German current conditions (-9.5, est. -13.5, prior -19.9) may not have rebounded as much as expectations (highest level since 2015 at +26.7, est. +15.0, prior +10.7) but the lead aspect of the expectations (Eurozone also rose to highest since early 2018 at +25.6, prior +11.2) suggests a more positive performance in 1H’20.
Trump and Mnuchin provided supportive, if circumspect, comments in Davos on potential deals around EU digital tax and auto sector whilst also maintaining the threat of tariffs.
Trump also addressed WEF with an extremely positive profile of US economic prosperity and the need to advance rather than pander to alarmists.UK Nov. employment data were stronger than expected. Employment in the 3 months to Nov. rose 208k (est. 110k, prior 25k) and average weekly wages held firmer than expected at 3.2%y/y (est. 3.1%y/y). Unemployment was unchanged at 3.8%.
Event Outlook
The key data release today is the Westpac–MI Consumer Sentiment survey for January. In December, sentiment declined 1.9% to 95.1, well below the optimist/pessimist divide of 100. This edition of the survey will capture the effect of the bushfire emergency seen in many parts of the nation over summer followed in the survey week by some much-needed rain. Note that the headline measure in the report is adjusted to remove a regular ‘holiday bump’ in January worth around +4pts.
Out later in the day is US housing data (FHFA house prices for November and December existing home sales, for which the demand backdrop is supportive) as well as the Chicago Fed activity index. In Canada, the Bank of Canada is expected to keep policy on hold while they assess the extent of recent domestic weakness and global conditions.
Here’s the German ZEW:
I expect the bounce in real activity to be less spectacular. In part thanks to an only modest improvement in Chinese car sales:
That’s if coronavirus doesn’t crash it all up in the new few weeks, via Bloomie:
China’s mysterious respiratory virus has caused six deaths and infected a number of medical workers, a sign the outbreak has entered a new phase with the illness spreading from person to person.
Health-care workers contracting the new illness indicates that it is more easily transmitted than previously thought, bringing the outbreak to a higher risk level, reminiscent of the severe acute respiratory syndrome, or SARS, pandemic that killed 800 people in Asia 17 years ago. China on Tuesday raised the number of confirmed cases to 291.
…Fifteen medical professionals have been affected, with one critically ill, according to a report from China’s state news agency Xinhua. The transmission to medical workers is considered particularly worrisome because of the heavy precautions that were taken in Wuhan to try to minimize infections among health-care staff. Many doctors and nurses were also infected and died in the SARS outbreak.
Another report in The Guardian is worrying:
China is on high alert as a new strain of coronavirus – first detected in Wuhan – spreads across the country. If hospitals are not screening for the virus then the number of cases, and deaths, could be much higher than those cited in official reports.
Authorities reported three more deaths on Tuesday: an 89-year-old male, a 66-year-old male and a 48-year-old female. The government has confirmed 308 cases, with 270 of them in Hubei province, of which Wuhan is the capital.
…The number of confirmed infections is likely to have been underestimated, according to international public health experts, who say there could be as many as 1,700 cases.
It could be much higher and so could the number of deaths. If it can kill healthy adults then it’s a real disaster in the making.
Still too early to call but expect the Australian dollar to be one major casualty as it worsens.
